Dorcan Corporation Manufactures and Sells T-Shirts Imprinted with College Names

question 141

Multiple Choice

Dorcan Corporation manufactures and sells T-shirts imprinted with college names and slogans.Last year,the shirts sold for $7.50 each,and the variable cost to manufacture them was $2.25 per unit.The company needed to sell 20,000 shirts to break-even.The after tax net income last year was $5,040.Donnelly's expectations for the coming year include the following: (CMA adapted)
• The sales price of the T-shirts will be $9
• Variable cost to manufacture will increase by one-third
• Fixed costs will increase by 10%
• The income tax rate of 40% will be unchanged.
Based on a $10 selling price per unit and if Dorcan Corporation wishes to earn $37,800 in after tax net income for the coming year,the company's sales volume in dollars must be:

• A) $213,750.
• B) $257,625.
• C) $207,000.
• D) $255,000.

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Definitions:

Demand Curve

A graphical representation that shows the relationship between the price of a good and the quantity demanded by consumers.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a given period.

Quantity Supplied

The total amount of a good or service that sellers are willing and able to sell at a given price level, at a specific time.

Bushels Of Wheat

A measure of volume used chiefly in the U.S. to quantify the production or trading of wheat and other grains.